Audiology Sector

Abano’s audiology businesses – Bay Audio – are located in Australia and across South East Asia. The businesses are owned by Bay International, in which Abano has a 50% shareholding, alongside the original Bay Audiology founders.

We have a growth strategy in place for both our audiology networks. These businesses are currently in a development phase and it will be a further two to three years before breakeven is achieved and any material profit contributions are generated.

Revenue is derived from both private paying customers (65%), as well as lower value, Government subsidised hearing aids (35%).

Our audiology businesses have been established using the same factors that contributed to the success of the Bay Audiology New Zealand business. In particular, a focus on innovation, a customer-centric service and the greenfield development of modern, retail based stores.

During the financial year, we continued to invest into the IT infrastructure in both Australia and Asia, including ongoing conversions into Chinese for the Asian networks. We also invested into staff training and development, and local marketing programmes. Under IFRS, most of these costs are expensed, and therefore, there will be an ongoing impact on returns as we continue to invest into and develop these businesses.

Year on year revenues have increased and the business now has over NZ$24 million in annualised revenues. Good growth is starting to be seen in our two largest markets – Australia and Taiwan – with double digit, same store growth in the second half of the financial year.

However, the remaining stores in the smaller investment markets of Malaysia, Singapore and Hong Kong have underperformed against expectations, due in part to the lack of scale and size in these markets and escalating rents in Hong Kong and in Singapore, which led to the closure of one store in each of these countries. Initiatives are now underway to address the cost of leasing which may lead to retail hub and spoke models in these markets.

As this is a 50:50 joint venture, we do not consolidate the revenue and EBITDA from the audiology businesses; rather, we equity account our 50% share of the NPAT result in the financial period.

OUTLOOK

We have an indepth knowledge of the audiology sector and this business model. Along with our partner, we will continue to invest in building the platform to enable long term, sustainable future growth and profit generation.

We currently have over 4,000 people per month who use Bay Audio’s innovative touch screen technology to self test their hearing. Our aim is to convert these into paying customers who seek further support and solutions for hearing problems.

In FY12, we successfully applied for funding from New Zealand Trade and Enterprise to support a more rapid execution of our Asian audiology development strategy. The $1 million grant, payable over three years, is part of the NZTE International Growth Fund. The Fund is targeted at businesses that NZTE has assessed as being most likely to contribute to New Zealand’s long-term growth.